Components of Blockchain

Blockchain is the technology that stores and secures data efficiently. This is because the data stored in blockchains are irreversible and immutable. Mainly, components of blockchain play a key role in ensuring data security and integrity. If you are keen on learning the components of blockchain, then you are at the right place. You can quickly learn all you want to know about blockchain and its components from this blog.

Tracking, storing, and protecting data from its origin to its current stage is an inevitable process in every business. Businesses want to secure their data from corrupt-free, such as tampering, fraud, and scams. Blockchain is a novel technology with beautiful features such as immutability and transparency. With these features, companies can record, track, and store their data permanently. No one can ever alter the data – thanks to blockchain.

The components of blockchain, such as blocks, nodes, nonce, hashes, and ledger, play an essential role in ensuring data security and integrity. This blog bags the basics of blockchain, how it works, components of blockchain, types, features, and many more.

Blockchain Components - Table of Components

What is Blockchain?

Blockchain is nothing but a shared and distributed database. It is also known as Distributed Ledger Technology (DLT) since it is a digital ledger decentralized to share data across the nodes of a computer network. Here, the nodes can be computers, servers, or laptops. Blockchain ensures transparent data to all its participants or nodes in the network. Essentially, blockchains are immutable or irreversible. It means you can share a ledger or data with your participants in the blockchain network, but you cannot edit the same. For this reason, blockchain networks are also called trustless networks.

Block is one of the essential components of blockchains. Similar to tables in databases block store data of user transactions. The important thing about blockchain is that once blocks are linked together, you cannot change the data in the blocks. Even you cannot insert any blocks between two blocks. If anyone tries to change data in the blocks, all the participants in the blockchain network will be alerted immediately. So, you can make secure transactions using blockchain technology. Simply put, blockchains increase data integrity and security with a ‘single source of truth and help to eliminate data duplication.

How does Blockchain Work?

Once a new transaction enters a blockchain network, the transaction data will be stored in a block. This block will have all the transaction details, such as who initiates the transaction, when it is made, what type of transaction, the quantity and characteristics of the transaction, and so on. More blocks will be added with the block when the transaction keeps on storing information continuously. These new blocks will be added with the previous blocks in a sequence. As a result, it forms a chain of blocks – known as a blockchain.

Are you still wondering how a blockchain works? Let’s consider this example. When an asset moves from one location to another, all the data related to this transaction will be continuously recorded in a block. If the asset keeps moving to many places, it will generate more data, and the newly generated data needs to be stored in new blocks. And these new blocks will be connected with the previous blocks forming a blockchain. Note that the asset can be a tangible asset or an intangible asset.

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Why Blockchain?

Are you interested in knowing why blockchain is used to store data efficiently? Let’s look at the reason below.

  • Blockchains are immutable, tamper-evident, and irreversible. So you can build a trustful digital ledger using blockchains.
  • When new blocks are added, it boosts the strength of blockchains
  • It ensures data security in transactions and increases the speed of data access as well
  • It offers instant traceability and greater transparency
  • It allows participants of the network to access block data with permissions as well as without permissions
  • It eliminates the dependency on using third parties to verify transactions. As a result, the cost of transactions and compliances is reduced significantly.

What are the Components of Blockchain?

Blockchain has many powerful components that play an excellent role in storing and securing data. Let’s discuss the components of blockchain in a detailed way below:

Blocks: Basically, blocks are the backbone of blockchains. You can store data in blocks permanently but cannot change or delete it after it is stored. Once a block is filled with the data of transactions, then it will be linked with previous blocks. Every block will have information such as block size, transaction counter, block header, the previous block's hash, timestamp, and transaction data.

Know that blocks are linked based on cryptographic methodology. Generally, blocks are identified with long numbers that will have information about previous blocks as well as a new transaction. While creating new blocks, data inside a block is verified by a blockchain network. After that, you can add new blocks to the blockchain.

Hash Codes: It is one of the vital security features used in blockchain technology. In its basic form, a hash code has a fixed length. It helps to ensure that no one can crack blockchains or alter block data. You can use Hash codes to verify the integrity of transactions as well as authentication. You can add new blocks only after solving hash codes. Note that it must generate the same output whenever you apply the hash function in data in a block. If not, it means that the data in the block is modified.

Components of Blockchain

Nodes: It is one of the essential components of blockchains. Nodes are storage units that store vast amounts of blockchain data. As you know, nodes can be computers, servers, and laptops. All nodes are connected in a blockchain network. If any change is made in the blockchain's data, nodes can detect it quickly. There are two types of nodes such as full nodes and light nodes.

  • Full Nodes: Generally, a full node stores the complete copy of a blockchain. In other words, once a full node joins a blockchain, it stores copies of all the blocks. After the node is synchronized with all other nodes in the network, it can add new blocks to the blockchain. Full nodes usually have more memory than light nodes. They can accept, reject, and validate transactions.
  • Light Nodes: They are also known as partial nodes. This is because they don't copy all the blocks in the blockchain. Instead, they only store the recent blocks and access older ones only when users request the same. They maintain the hash code of transactions. You can access data only after solving the hash code. Unlike full nodes, they have only low computing power and memory.

Ledger: Essentially, this component of a blockchain resembles a record-keeping mechanism. There are three types of ledgers: public, decentralized and distributed.

  • Public Ledger: In this type, anyone can access ledgers since it is open to all blockchain network participants. There is no central authority in this public ledger type. And it allows transactions only after verifying the identity of users. At the same time, participants' identities are hidden until they make any transaction.
  • Distributed Ledger: In distributed type, all the nodes will have a copy of databases. A group of nodes will manage the tasks, such as verifying transactions or adding blocks to a blockchain. You can significantly reduce financial fraud and cyberattacks by using this ledger. You can access all the information stored in this ledger using cryptographic signatures and keys.
  • Decentralized Ledger: In this type, no participant needs to trust others or know their identities. The stakeholders or partners can access real-time data from the ledgers anytime. This ledger lessens reliance on specific authorities that manage the network. It brings consistency and improves performance by decentralizing resources.

Nonce: Nonce is yet another vital component of blockchain. It refers to a ‘Number used only once. In its basic form, a nonce is a 32-bit number randomly used only once. It is also a pseudo-random number that you can use only once in a cryptographic communication. Generally, a nonce is created only once while creating a new block or validating a new transaction. Once a perfect nonce is created, you can add it with the hashed blocks in a blockchain. After that, the block's hash value is rehashed, eventually creating a difficult algorithm. With this component of blockchain, you can make secured transactions because nonce verifies all the transactions along with other data of blocks.

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What are the Types of Blockchains?

There are four types of blockchains. Let’s have a look at them below:

Public: It is also known as a permissionless or non-restrictive blockchain. Anyone can participate without any restrictions in this blockchain. They need to sign on and become one of the authorized nodes in the blockchain. Consensus algorithms and rules govern this blockchain. Users can access the records in the blocks and perform mining activities but only within the limits of the rules and algorithms. Public blockchain provides a high level of transparency. That’s why it is widely used in many cryptocurrency systems.

Private: This type of blockchain is also known as permission or enterprise blockchain. Not only that, it is a restricted or closed blockchain network. Typically, a single entity controls the network and private blockchains. And the entity will set permission levels, accessibility, and authorizations. None can access data in blockchains except those who have permissions. This blockchain is mainly used in small networks or inside organizations.

Consortium: This blockchain type is also known as a federated blockchain. Unlike private blockchains, no single entity can control a network. In this blockchain, many organizations can collaborate on the decentralized network. A pre-selected set of nodes usually manages consensus and mining processes. Besides, consortium blockchains consist of validator nodes that can initiate, validate, and receive transactions.

Hybrid: It includes both private and public blockchains. So, specific users can access some data, and all participants in this blockchain type can access the remaining data. A single entity controls the hybrid blockchain but cannot change any data. Besides, user identity is hidden until they make any transaction.

Types of Blockchains

What are the Features of Blockchain?

Blockchain comes with a lot of capabilities. To understand it better, let’s read the below to know the features of blockchain.

Decentralized Trust: Essentially, blockchain doesn’t use any centralized authority. It means that no single entity can control the data in blockchains. As a result, it ensures data integrity and security. Users can directly access blocks through the internet and add their data to blockchains. Here, the data can be cryptocurrencies, contracts, documents, or any other digital data. This feature of blockchain provides users with data storage free from failures, third parties, scams, and so on.

Consensus Algorithms: Every blockchain will have consensus algorithms that support networks to make correct decisions quickly. In the simplest terms, a consensus is the decision-making process that helps nodes in a network. Participants can set rules for making consensus decisions.

Immutability: As you know, a blockchain network is a collection of nodes. If you plan to add a new transaction, it needs to be validated by all the network nodes. Only when most nodes in the network agree with the transaction, you can add the transaction to a blockchain. This setup ensures transparency and a corrupt-free network. None can edit or delete once the transaction is added to the blockchain.

Security: Know that cryptography is an advanced method you can use as a firewall to protect data in blockchains. This method acts as an additional layer of protection in blockchains. Mainly, blockchains use hashed cryptography where hash codes act as a unique identifier for each block in a blockchain.

What are the Real-time Applications of Blockchain?

No surprise there are a lot of real-time applications offered by blockchain in various sectors. Let's uncover them one by one as follows:

Healthcare: With blockchain technology, you can easily manage e-medical data, protect genomic information, and track the history of diseases and outbreaks at a glance. Blockchain can be used in precision medicine, the latest technology to drastically improve health output by reducing side effects. You can enhance pharmaceutical products' traceability from their origin in the supply chain.

Government: Blockchain can be used in voting systems, especially for personal identification. Also, it can be used for storing digital IDs, passports, and certificates in immutable ledgers. It helps to protect information shared between citizens and governments. It can support meeting regulatory compliances, identity management, contract management, and citizen services. Overall, blockchain helps to reduce time, risks, and costs in managing sensitive information.

Banking: This is where blockchain technology is more highly required than any other domain. Blockchain helps to speed up financial transactions and, at the same time, removes friction in the process. Mainly, you can reduce fraud and enable multi-party monitoring in real-time. In addition, blockchain simplifies calculation and reporting, funds traceability, reconciliation, settlements, digitising assets, and many more.

Supply Chain: By using blockchain, you can track the movement of products seamlessly. As a result, you can get visibility across the supply chain. Blockchain simplifies new supplier onboarding. Not just that, it helps businesses from forgery and misuse of resources. In short, blockchain ensures a resilient, confidential, trustful, and transparent supply chain.

Media and Entertainment: Blockchain can play a crucial role in online ticketing, peer-to-peer sales, rights management, and content distribution. It helps to eliminate fraud, streamline bills and to invoice, and automate royalty payments. Using blockchain, you support making micropayments and usage-based consumption models. Moreover, you can monitor ad metrics to analyse how budgets are spent.

Automotive: Blockchain allows you to build a transparent and efficient manufacturing process reducing costs to the least. You can track vehicle history, insurance claims, vehicle ownership, service payment, and many more. With blockchain, you can verify whether you are getting raw materials from trusted and reliable sources. Automatic vehicle fleet management can be simplified with blockchain. Further, you can analyse the daily usage of vehicles, technical failures, routes they traveled, and so on.

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What are the Benefits of blockchain?

Let’s see the benefits of blockchain below:

  • Blockchain integrates data in one place through a distributed digital ledger
  • It eliminates the need for third parties to secure data
  • It creates trust among partners by sharing immutable data
  • It increases data integrity and security
  • It helps to verify digital credentials
  • It allows users to store their digital IDs in the encrypted digital wallet

What are the Limitations of Blockchain?

No doubt blockchain has a few drawbacks as well. Let’s have a look at them below:

  • The speed of transactions depends on network congestion. When the number of nodes in a network increases, the speed decreases. So, scalability is not good in blockchain systems.
  • Licensing, implementation, development of blockchain systems, and maintenance cost are high.
  • It is a fact that the use of private keys in a decentralized network is risky. If the keys are stolen, the intruder can access the entire blockchain. Also, no one can forever access any network data if the key is lost.
  • The proof of Work (PoW) consensus algorithm consumes a large quantity of computing power for validating transactions
  • Interfacing blockchain with legacy systems is not a simple thing. Above all, expert personnel is needed to manage blockchains effectively.


No wonder Blockchain is a game-changing technology that provides security, efficiency, and reliability on a grander scale. Blockchain protects your data from misuse, disruptions, and fraud. The components of blockchain play an essential role in securing data and building trust among users. That's why many industries, such as banking, supply chain, finance, etc., have embraced blockchain technology as a part of their business. No doubt that it's a novel technology that has the potential to grow in a more significant way.

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Last updated: 04 Apr 2023
About Author

Kalla Saikumar is a technology expert and is currently working as a Marketing Analyst at MindMajix. Write articles on multiple platforms such as Tableau, PowerBi, Business Analysis, SQL Server, MySQL, Oracle, and other courses. And you can join him on LinkedIn and Twitter.

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